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What is mortgage underwriting?

Before a lender can approve you for a home loan, the company will need to be sure you'll be able to pay the money back.

The process in which they assess your ability to do that is called underwriting.

The bank, credit union or mortgage lender you’re working with will assign a mortgage underwriter to your case. The underwriter will review all your documents, check your credit history, your debts, add up your assets and assess your potential risk as a borrower.

Once the underwriter has completed the investigation, a recommendation will be made on whether you should be granted the loan.

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What happens when a mortgage goes into underwriting?

When your loan application moves into the underwriting phase, all aspects of your financial wellness will be scrutinized closely.

The purpose of this phase is to protect the lender from granting loans to risky borrowers who are likely to default on their payments.

You won’t be expected to do anything, but you may be asked to supply more documentation or to clarify or explain anything found in your financial history.

What do underwriters look for in mortgage applications?

Most mortgage lenders follow the guidelines set by Fannie Mae and Freddie Mac, the two federally-backed mortgage loan companies.

Through the underwriting process, your loan officer or mortgage broker will look at your financial details, including:

  • Your credit score: Do you meet the minimum requirements for the loan type you’ve applied for?
  • Your credit report: This will contain records of your payment history. They’ll want to see that you have historically kept up with your loan payments.
  • Your income: They may ask for proof to see you have a job and money coming in.
  • Your debt ratios: Underwriters will use the debt-to-income ratio to assess your financial flexibility. They’ll compare the amount you bring in each month (income) to what goes out (your debt payments) to determine whether you have enough income to cover all your debt. And most importantly, whether you can afford to include all the additional monthly costs of a mortgage loan in your monthly responsibilities.
  • Your savings: They’ll take a look at your savings account to ensure you’ve got the money to make your down payment and cover your closing costs.

They’ll also order an appraisal of the home in question to ensure its value matches what you’re offering to pay for it.

What they’re trying to assess through this process is how likely you are to stop making payments on your loan. If you have a poor credit score and a history of delinquencies on your other loans, you’re going to be deemed a fairly high risk borrower.

But your underwriter will look at the big picture. If your credit score is less than amazing, but you have plenty of savings and your debt-to-income ratio is low, they may still approve you.

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How long does mortgage underwriting take?

How long it takes to review your application varies case to case. It can take as little as a few days and up to a few weeks to go over your file.

To speed up the process, make sure you submit all the required documentation promptly and reply to any questions or requests for additional information as quickly as possible.

Mortgage underwriting process: Steps to expect

While you’re not technically involved in the underwriting process, it’s good to know what’s involved so you can try to remove any roadblocks in advance to ensure it goes as smoothly as possible.

Here’s how you can expect it to go:

Get prequalified

The first thing you should do before you even start house hunting is get pre-approval for a mortgage.

During pre-approval, lenders will take a look at your financial records, including your income, debt and credit score.

This will give you an idea of what kind of price range you should be looking within for a home.

Income verification and documents

Your lender will want to verify your employment and income. For that purpose, they may ask to see your tax returns or bank statements.

Once you’ve been pre-approved, your lender will issue you a pre-approval letter with the amount they’re willing to loan you included. This letter will convey to potential sellers that you’re serious about buying a home and that you can secure the financing for it.


Now you’re free to search for a home you’d like to buy. Once you find the right property and make an offer on it, your lender will want to ensure that offer is in line with the home’s fair market value.

How they’ll do that is through ordering a home appraisal. The appraiser will look at the home, its features and compare it with properties that have recently sold in the area.

You’ll have to pay for the appraisal and how much it costs depends on the size of your home, but generally ranges between a few hundred and a thousand dollars.

Title search and title insurance

Next, your lender will want to ensure that there’s nothing to prevent the transfer of ownership.

A title company will do a title search, ensuring no one else has a legal right to the property. That could happen if the seller has failed to pay any debts that have the home listed as collateral.

In such a case, a lien would be placed on the home and it would prevent you from being able to take over the title.

Provided nothing comes up in the search, your title company will then provide title insurance, which will cover you in case there are any issues down the line that the title search didn’t uncover.

The decision

The final step of the underwriting process is the lender’s decision. It can go one of four ways: approved, denied, suspended or approved with conditions.


Provided your financials are in order, the home is appraised at a rate in line with your offer and the title search doesn’t uncover any issues, your lender will approve your loan and set your closing date.


For whatever reason, the lender feels you’re too risky of a borrower. It doesn’t mean you’ll never qualify for a mortgage, but there’s something about your application that didn’t sit right.

If it’s something you can work on, you can take some steps to potentially qualify a few months down the road.

To do that, you’ll need to find out exactly what the issue was. If it’s your debt, maybe you can rectify that through debt consolidation. Poor credit can also be improved through a credit repair loan from Self Lender.

More: Here's what to do if mortgage loan denied in underwriting


This usually indicates your lender couldn’t verify some of the information you provided them with, potentially your income and employment. Often you can reactivate the application by supplying the required information or documentation.

Approved with conditions

Your lender may need more information or documents from you before they feel comfortable moving ahead with the application. They may approve you on the condition that you supply additional documents such as pay stubs, tax returns, insurance policies, marriage certificates or divorce decrees.

Next steps

Once you’ve successfully been approved and cleared any potential conditions, you can move forward with closing on the home.

Are you ready?

Getting your loan is the first step, but it’s not the end of the road.

Once you’re in the home, make sure you keep on top of your mortgage payments and stay financially on track.

Not sure if you’re ready?

That’s OK. Buying a home is a big commitment, you want to be confident you can manage it before you lock yourself in to a mortgage.

There are options to improve your credit score and get yourself out of debt.

If you stick to a budget and work on your financial wellness, you’ll soon find yourself ready to take on a mortgage.


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About the Author

Sigrid Forberg

Sigrid Forberg

Associate Editor

Sigrid’s is Moneywise.com's associate editor, and she has also worked as a reporter and staff writer on the Moneywise team.

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